Canada’s vaccination drive has been painfully slow. However, with new shipments of vaccines coming in, analysts are hopeful cases will decline, and the economy will reopen by summer.
That means investors should brace for a rebound in some sectors of the economy. Here are the top three rebound stocks for the second half of 2021.
Rebound stock #1
Alimentation Couche-Tard (TSX:ATD.A)(TSX:ATD.B) has been flat for over two years. That’s right: the stock is trading at the same level it was before the crisis. That’s because the company’s core business of selling fuel has declined, while a surge in convenience sales have offset the losses.
This year, however, travel could rebound sharply across the world. Couche-Tard’s exposure to North America, particularly the U.S., should see its sales skyrocket throughout 2021. Meanwhile, the stock is trading at just 14 times earnings per share.
Another potential catalyst is a major acquisition. The Couche-Tard team has enough cash on hand and access to debt to pull off a major purchase that could be value accretive for shareholders.
Couche-Tard is an undervalued rebound stock that should be on your radar for 2021.
Rebound stock #2
Keg Royalties Income Fund (TSX:KEG.UN) is another clear winner of the grand reopening this summer. Keg operates a chain of pubs and restaurants that have been locked shut for much of the past year. Unsurprisingly, the stock price has doubled since the vaccine was announced.
Despite the recent surge, Keg has more room to run. It offers a lucrative 3% dividend yield right now. The underlying income that backs this dividend could surge when consumers head back to pubs and restaurants in the second half of 2021.
Keg stock is trading at just 10 times earnings. It’s an undervalued rebound stock with lots of potential.
Rebound stock #3
Recipe Unlimited (TSX:RECP) has had a similar run over the past year. The stock has nearly doubled since the vaccine was announced. Now, it offers a 2.45% dividend yield and trades at $19.32 per share.
The company owns Keg outlets, along with several other brands that makes it a similarly attractive rebound stock. Other brands include East Side Mario’s and Milestones. Off-premise system sales rose 44% year over year to $500 million in 2020. Meanwhile, Recipe managed to achieve positive operating EBITDA of $113 million for the full year.
Sales and gross income should surge, as provinces reopen indoor dining in the months ahead. Add this undervalued restaurant stock to your watch list for 2021.
The vaccination drive is clearly gaining steam. In the months ahead, several provinces could fully reopen. Restaurant and gas stations could be the clear winners. Keep an eye on stocks like Couche-Tard and the Keg Income Fund.
The reopening should unleash pent-up demand in travel, leisure, and hospitality sectors. Investors seeking bargains should focus on these industries for the months ahead.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Vishesh Raisinghani owns shares of ALIMENTATION COUCHE-TARD INC. The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC.